Context & Challenges of the 2021 EU Green Bond Standard

Abstract

Human activity has been continuously harming our planet’s eco-system, and we have reached an unprecedented level of urgency. According to the International Panel on Climate Change, we have caused virtually 100% of the global warming of the past century. Undeniably, finance plays a vital role in decreasing the devastating effects of our own behaviour. As the green bond market expands, it is undoubtedly becoming essential for green finance and the transition to a resource efficient, low-carbon, and socially inclusive economy. Still, the green bond market remains mostly unregulated. On this, the EU Green Bond Standard is a step forward, establishing the first framework encompassing regulatory supervision, the result of years of international cooperation on climate change mitigation. However, progress in any field entails both advantages and challenges. Striking the right balance of strictness will prove to be critical. The success of the benchmark will be ultimately conditioned by its efficient implementation, contingent upon the effect of regulation on innovation, the alignment with the EU Taxonomy, the proposed voluntary nature, and the extent to which it reduces greenwashing.

Keywords: EU, Green Finance, Green Bonds, Greenwashing, Market Regulation, European Green Bond Standard, EUGBS, Climate Crisis

JEL Classification: G01, G15, G18, G28, K00, K2, K32, Q38, Q4, Q42, Q54